Working in retirement: Back to the future

We’ve noticed an increasing trend among our clients choosing to work beyond the traditional retirement age of 65. While this decision can be driven by a variety of factors, it’s crucial to understand the pros and cons and strategically plan for it.

For those who haven’t saved enough, continuing to work can be key for financial stability. Business owners often work beyond retirement age to establish a succession plan, especially if there’s no immediate successor. But working in retirement isn’t always just about finances — it’s often a matter of identity, purpose and staying active. Many find fulfillment in their careers and choose to continue out of passion, not necessity. From a health standpoint, working can keep individuals physically active and cognitively sharp. And, of course, working provides social interaction, which is vital for mental health as we age.

Deciding to work post-retirement comes with its set of challenges and benefits. On the pro side, continued work can enhance financial security, allowing for a more comfortable retirement lifestyle. It also helps provide a sense of accomplishment and identity. However, there are cons as well. Increased income can lead to higher taxes and potentially affect the efficiency of your retirement plan. Working can also mean less time for leisure activities, travel and family. Depending on the nature of your job in retirement, there could also be physical or mental stress involved.

The financial side of working in retirement

When choosing to work post-retirement, it’s essential to consider a few financial implications:

  • Taxation: More income can mean higher taxes. It’s important to understand how additional income will impact your tax bracket.
  • Government benefits: You might need to re-evaluate when to start taking government benefits like CPP (Canada Pension Plan). Sometimes, deferring these benefits can be more advantageous.
  • Pension plans: You’ll want to assess how continued income affects your pension plans. There could be opportunities to optimize your pension benefits.
  • RRSPs and investments: You’ll need to decide when to start drawing down on RRSPs and other investments. Working longer may allow you to delay this and potentially grow your nest egg further.

A few tips if you’re considering working in retirement

  • Plan ahead: Discuss your plans with your financial advisor to understand how working may impact your financial situation.
  • Consider part-time or contract work: These options can offer more flexibility and less stress than full-time roles.
  • Balance work and leisure: You’ve worked hard for decades. Ensure that work doesn’t overshadow other retirement plans, like travel or spending time with family.
  • Stay informed on tax implications: Understand or ask your advisor about how your income will affect your taxes and government benefits.
  • Explore non-financial benefits: Consider roles that offer personal fulfillment beyond a paycheque.

Choosing to work during retirement is a personal decision that depends on your individual circumstances, goals and needs. Your advisor can work with you to navigate this decision, ensuring that your financial plan aligns with your retirement vision.

If you’re considering working in retirement, let’s discuss how to make this choice beneficial both financially and personally. Reach out to us anytime.